Senator Charles E. Grassley of the Senate Judiciary and Finance Committees issued a letter on Thursday essentially declaring that the American Red Cross (ARC) is stonewalling his investigation on questions of accountability where its activities and spending in Haiti are concerned. The ARC received approximately $487 million dollars to provide food and shelter in the aftermath of the 2010 earthquake.

Eventually, questions began to be raised about the organization’s effectiveness in Haiti, with charges about inefficiencies and waste. Grassley mentioned that reports also surfaced about the ARC viewing the disaster as a public relations and fundraising opportunity.

Most of the work the ARC did in Haiti under the Haiti Assistance Project (HAP) was in fact subcontracted to other organizations. Still, the Red Cross retained around 25 percent of that money, or $124 million, for its own operations and program costs. The rest, around $367 million, went to contracts with partner agencies, but the whole picture is obscured by a “complex yet inaccurate process to track…spending.” Consequently, the organization has been unable to answer questions about, for instance, how much went to oversight and evaluation activities—an important accountability measure, as far as Grassley is concerned. He writes that the ARC blames its lack of precision on its reliance on “nonprofit accounting standards which allow for the use of estimates rather than actual numbers.”

In the same vein, Grassley charges that the ARC attempted to stop and then successfully limited a GAO audit, whereupon it still refused to respond to requests for information. And, finally, it has downsized its own Investigations, Accountability and Ethics (ICE) unit from 65 full-time employees in the immediate aftermath of Katrina to just three today. Further, that unit reports to the organization’s general counsel, who was the contact pushing limits on the purview of the GAO review.

All of this, writes Grassley, creates substantial and fundamental concerns about ARC as an organization. Readers can go here to read the letter and the Red Cross’s response to queries.—Ruth McCambridge

Ruth is Editor in Chief of the Nonprofit Quarterly. Her background includes forty-five years of experience in nonprofits, primarily in organizations that mix grassroots community work with policy change. Beginning in the mid-1980s, Ruth spent a decade at the Boston Foundation, developing and implementing capacity building programs and advocating for grantmaking attention to constituent involvement.

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Tonight’s VICE expose of where $10 billion in Haiti aid ended up is worth your time.

michelnau

It’s common practice for large organizations like American Red Cross to subcontract most of their works to local partners who know the disaster areas very well, and to other NGOs for their expertise in managing and monitoring. The Red Cross retained around 25 percent of that money, or $124 million, for IDC/overhead/F&A/ its own operations and program costs is nothing compare to other organizations who charge more than twice of that. I agree that all subcontractors under “cooperative agreement” should be supervised for accountability and compliance to make sure that donors and taxpayers money is accountable and uses for what it was intended for. I also agree that the American Red Cross as the “prime contractor” should retain incentive and reward fees of these subcontractors if they don’t show sustainable results. ARC charging 25% overhead shouldn’t be the issue here. Having total control of subcontractors, and demanding sustainable results should be “la carte du jour” here.

Nikki

I’ll never understand why people continue to give to large charities like ARC, United Way, The Samaritan’s Purse and the likes. People hear the name and get goose bumps and open their purses without following the money trail. Whoever came up with concept to create a middle man to get money from the people and distribute it to charities must be very wealthy, and we peasants must be very gullible to continue to fall for these types of fundraising ponzi schemes.